Question

1. Let’s say that on the first day of this class, Econ 10 B, 90 students try to get in, but there are only 70 seats available. Let’s say that we cannot change rooms, and we cannot wait for 20 students to drop the class. We must decide which 70 students to let in, and which 20 to reject. This can be called RESOURCE ALLOCATON. A. Please explain this problem in terms of Supply, Demand, Price and Quantity.   B. Please list and discuss at least five methods of allocating this resource --- that is, five ways of deciding which 70 people to let in and which 20 people to … NOT let in.   Assume that you have the time and resources necessary to check into the background of all 90 people --- units needed to transfer, GPA, past attendance records – if you desire to do so.   C. Please RANK your various methods of allocating this resource from the “BEST” method to the “WORST” method, and defend your ranking system.   D. As the rationing body, what are your GOALS? Among these 90 people, what TRAITS or CHARACTERISITCS do you want to reward? WHY? E. What would the “highest bidder” system (also known as the ‘free market’ system) do in this case?   F. Most of us see the ‘free market’ solution as the wrong outcome in this case. Why? Why is education different from a car sold by Ford or a burger sold by McDonalds?

Answer 1

A.

The problem here is that the supply exceeds the demand. The commodity in question are the seats available, the demand is from the 90 students and the supply is the 70 available seats. The price will be the fee required.

B.

Five methods to help allocate the seats can be as follows -

1. Based on their highest GPA and previous knowledge of economics
2. Based on their ability to afford the seat
3. Based on their previous class attendance
4. Based on the result of some entrance test conducted by us
5. Based on first-come-first-serve basis

C.

The ranking can be as follows (from best to worst)-

1. Based on the result of some entrance test conducted by us
2. Based on their highest GPA and previous knowledge of economics
3. Based on their previous class attendance
4. sed on their ability to afford the seat
5. Based on first-come-first-serve basis

This ranking system is justified as the first and the most important criteria should be to conduct a test which will test the students on the skills required for taking this course. This comes even before previous GPA and knowledge of economics because it might have been possible for some of the students to fake their test results previously, or some deserving student might have been sick and hence not done well in the previous test. Third criteria should be their previous attendance, as that shows the determination of the student for learning, but again, some deserving student might be sick and hence missed out on some classes. The fourth criteria should be based on their ability to pay because regardless of the fact that education should not be based on money, the college does still need to pay for certain ammenties that it provides like electricity, benches and chairs, teaching aids like boards, etc. The last one should be based on first-come-first-serve basis, since this is not based on any scientific criteria and just on the luck that a certain student would be among the first 70 people to come.

D.  

The traits and characteristics that should be rewarded are -

1. Motivation for learning
2. Determination in doing the course
3. Ability to pay attention to grasp what is taught
4. Timeliness in submission of assignments
5. Attendance to class
6. Ability to work in groups
7. Readiness to help other students
8. Interest in knowing more about the topics taught
9. Patience and hardwork in problem solving
10. Respect and admiration for fellow students and the instructor

E.

The free market system, since this is the case of monopoly, would give the seats to the students who can afford to pay for the seats. Hence, the top 70 people with the highest willingness and ability to pay would get the seats.

F.

The free market solution will be wrong in this case because this is not any other normal commodity. This is education as a commodity to which everyone in the society has access to, and hence it should not be allocated according to the ability to pay but according to whether the student is meritorious enough and determined enough to attain the knowledge. This is the difference between education and a car sold by Ford or a burger sold by McDonalds, because the latter can be allocated according to the ability and willingness to pay as they do not have any greater social significance and are merely goods produced for transaction purposes in the economy.